ITO, New Delhi V. M/s Priceless Overseas Ltd., New Delhi

ITA 6320/DEL/2016

• Counselvise Citation: [2023] 100 COUNSELVISE.COM (IT) 4681 (ITAT-DELHI)
• Duration Of Justice: 7 year(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-12-2023
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 14-09-2023
• Assessment Year: 2012-2013
• Appeal Filed On: 08-12-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Section: 68; 143(3); 133(6); 201; 251; 48

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “F” DELHI BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SHRI YOGESH KUMAR US, JUDICIAL MEMBER I.T.A. No.6320/DEL/2016 Assessment Year 2012-13 ITO Ward-20(2), New Delhi. Vs. Priceless Overseas Limited A-30, 2 nd Floor Kailash Colony, New Delhi. TAN/PAN: AAACP7636C (Appellant) (Respondent) Appellant by: Shri Vinod Bindal, CA Ms. Rinky Sharma, ITP Shri Saurabh Sharma, Adv. Respondent by: Ms. Beenu, Sr.DR Date of hearing: 15 09 2023 Date of pronouncement: 14 12 2023 O R D E R PER PRADIP KUMAR KEDIA-A.M. : T he c apti oned a ppeal has be en filed by t he R evenue a gainst the orde r o f the C ommi ss io ner of Income T ax (A ppeals)-X XX V I, N ew D elhi ( ‘C IT (A )’ i n s hor t) da te d 14. 10. 2016 a rising fr om the assess me nt orde r dat ed 27. 03. 20 15 pass ed by th e Assessing O fficer (A O) unde r Sect ion 143(3) of t he Inc ome T ax A ct, 19 61 (t he Act ) co ncerning AY 2012-1 3. 2. T he grou nds of appea l ra ised b y the Revenue re ad as unde r: “ 1 . O n t h e f a c t s a n d u n d e r t h e c i r c u m s t a n c e s o f t h e c a s e , t h e L d . C I T ( A ) h a s e r r e d i n l a w i n d e l e t i n g t h e a d d i t i o n o f R s . 1 , 9 5 , 0 0 ,0 0 0 / - m a d e b y t h e A O w i t h o u t a p p r e c i a t i n g t h e f a c t t h a t th e a s s e s s e e h a s c o m p l e t e l y f a i l e d i n d i s c h a rg i n g i t s o n u s o f g e n u i ne n e s s o f t h e t r a n s a c t i o n & c r e d i t w o r t h i n e s s o f t h e e n t i t i e s f r o m w h e r e t h e c r e d i t s h a v e b e e n a p p e a r i n g i n t h e b o o k s o f a s s e s s e e . I.T.A. No.6320/Del/2016 2 2 . O n t h e f a c t s a n d u n d e r t h e c i r c u m s t a n c e s o f t h e c a s e , t h e L d . C I T ( A ) h a s e r r e d i n l a w i n d e l e t i n g t h e a d d i t i o n o f R S . 3 ,9 0 ,0 0 0 / - o n a c c o u n t o f c o m m i s s i o n @ 2 % o f t h e a b o v e a d d i t i o n . ” 3. Br ie fl y stat ed, t he assessee-compan y is sta te d to be e ngage d in th e b us in ess of import, p rocess i ng a nd t ra di ng of ma rble. T he assessee filed ret urn of income fo r Assess me nt Year 2012 -13 in que st ion dec la ri ng taxable income a t Rs. 32,16, 820/-. The re tu rn fi led by the asse ss ee w as s ubj ect ed t o sc rut i ny asses sment. In th e cours e of scr uti ny assess ment, the Assessing O fficer int er ali a obs erve d that asses see- co mpa ny ha s ma de addi t io n in share capi tal fro m t hree K olkata bas ed compa nies n amel y, (i ) Capet ow n Merchandis e Pvt. L td. – Rs. 65, 00,0 00/ -; ( ii ) N ew Look V i nma y Pvt. Lt d. – Rs. 65 ,00, 000/ -; (iii ) V ishal Encla ve Priv ate L td. – Rs. 65, 00,000/-. T he A ssess ing O fficer made inquir ies on the genuine ness of subs cri pt ion rec e ived from the so called subs cri be rs bas ed in Ko lk ata. T he A ssessi ng O ff ice r inter a lia obs erve d t hat tho ugh new sha re hol de rs w ho a re Kolkat a bas ed co mpanies now h ol d 97. 50% o f the sha res of the assessee - co mpan y and the s ha res o f origi nal promot ers, i. e. , D almia Fa mi l y has bee n re duced to 2.5 % from exis t ing 100%, d espi te s uch dras t ic re duction i n the equit y holdings of D al mi a Fa mi l y, t he re has bee n no c hange i n t he ma na geme nt, direc tors hi p, cont ro l or operati ons of th e asse ssee -c ompan y. T o enqui re into na ture and sou rc e of suc h subs cription, no ti ces under Sec tion 133( 6) w ere iss ued to the subs cri be r c ompanie s. H ow ever, t he no tices iss ue d to t hes e co mpanies ret urne d back uns erved. The fa ct of non servi ce w as confr onted to the assesse e- compa ny. N otic es were again se nt but re tu rned back u ns er ve d. The reaf te r, the ass essee was asked t o pro duc e t he shar eholders of the comp any al ong w ith the ir boo ks of account f or nec essa ry ve ri fica tio ns. The as sessee howe ve r I.T.A. No.6320/Del/2016 3 expressed i ts i na bi li t y to p roduce the s ha reh ol ders. O ne more opportunit y w as give n to the assess ee t o fil e its res pons e. The assessee fi le d ass e ss me nt or der of tw o su bscr ib ers na mely, V is hal Enclav e Pvt. Lt d. and N ew L ook V i nma y Pvt. Ltd. pa ssed u nder Sect ion 14 3(3) of the A ct for A Y 2012-13. Th e Assess ing O f fice r fur th er ob serv ed t hat des pi te non-se rv ic e of notic e, le tte rs fro m thre e subsc ri be rs i n questi on w ere r ecei ve d b y D A K in a bi d t o confi rm t he subs criptio n. The A ssessi ng O fficer peruse d the fi na ncia l s ta te me nt of the s ubs cri be r companies a nd concl uded that the t ra nsa ct ion show n to ha ve bee n made b y w a y o f s hare subs cri pt io n are tr ansactions t ypical of paper co mpa ni es pr oviding accommodation e ntries. Re pl y of t he assessee was con sid er ed in the li ght of the decis io n of the C o -ordi nat e Be nch of Tri bunal i n the case of Bis akha Sa les (P) Lt d. vs. CIT, (2014) 5 2 ta xm ann. com 305 (K ol ) a nd he ld that t he mo ney r ece iv ed b y wa y of s hare subs cri pt io n lacks genuine nes s on the touc hst one of Secti on 68 of the Act. It w as further h el d that the a ssessee ha s faile d to dis charge it s onus un der Sect io n 68 of the Ac t i n the light of va ri ous judgme nts refer re d t o i n t he assess me nt order i nc luding judgment rende re d by the H on’ble D elhi H i gh C ourt in the case of CIT vs. N .R . Port f ol io Pv t. Ltd. , 96 D TR 281 (D el ). A re fe re nce w as ma de to va ri ous de cis ions an d obs erve d that mere fil in g of PAN , acknow led gemen t of Income Tax return of the ent ry pro vi ders, bank ac cou nt st ate ment et c. is not n ecessari l y suff ici ent to disc harge t he onus und er Sec tion 68 of the Act. T he Assessi ng O fficer obse rve d t hat t he s ubs c ri be rs are not s how n to be know n to t he as sessee-comp an y an d t hus i t is h igh ly implausible t hat suc h unknown s ubscr ib ers having N il /ne gligible income w il l make subs tantia l inves t me nt i n a n unknow n p ri vate co mpa ny wi t hout I.T.A. No.6320/Del/2016 4 adequ ate l y protec ting t he i nve stment and e nsur in g appr opr ia te re tu rns. T he A ssessing O fficer e mphasized that the person be hi nd these companies were not produced for exa mi na tion by the assessee to ma ke suita ble inqui r y. T he asses see adopt ed non c o- ope ration a tt i tu de and act e vas ivel y before t he A ssess i ng O fficer. The identi ty, c red itw orthi ness or ge nu inene ss of the t ra nsact ion canno t be sta ted t o be es tablished by me re l y show i ng t ha t the trans ac tion w as ma de through banki ng c ha nne ls. In su ch cases, the natu re of t ra nsac t io n requi red a deepe r sc rut in y for w hich the A ssessi ng O ffice r w as p reven te d fr om doi ng so. T he facts of the case w arra nt ed a ppr opria te inquir y on c ir cums tances for ma ki ng inves tment. Neith er t he no ti ce und er Secti on 133( 6) could be ser ve d nor s ubscribers w er e produced despit e spec ifi c re qui re me nt. T he A ssessi ng Of fice r re fe rre d to ma ny judgments and observed th at tests la id dow n in va rious j udic ia l decisi ons tow ard s ide ntit y of t he invest ors, t heir c re di two rthi ness a nd genuine ness of the tra nsac t io n ca nnot be sai d to be est ablished by me re ly pro duc ing pape r evide nc e o f tra nsact ion. T he Assessi ng O fficer t hus held t hat it is quite evid ent that assess ee has recei ve d une xpla ined c re di t of R s.1,9 5, 00, 00 0/- b y w ay of shar e cap it al and pre mi um from such o perat ors/subs cribers th rough c amouf la ged trans ac tion. T he genui neness and credi two rthiness of the pers ons gi vi ng sha re a ppli cat ion money to the assess ee is not pr oved a nd A ssessee has co mple te l y fai led to dis char ge its onus whic h la y upon t he ass essee. The Assess in g O ffi ce r accordingly invoked the pro visions of S ec tion 68 of t he A ct and ma de a n addi ti on o f Rs. 1, 95, 00, 000/- t o t he tota l income dec lare d b y the as sessee. Th e A ssessi ng O ff ice r also esti ma ted commi ss ion e xpens es i ncu rre d for such accom moda tio n entr y and ma de an addit i on of I.T.A. No.6320/Del/2016 5 Rs. 3, 90, 000/ - on s uch accoun t. 4. A gg rieve d by t he addi tions made, the as sessee pre fe rre d appea l bef ore t he CIT (A ). The C IT (A ) in t he firs t appeal found me rit i n the plea of t he assessee and held that t he onus pla ce d under Sec tion 68 of t he Ac t w as du ly di sch arged by t he ass esse e on t he bas is of documentar y evidences. The C IT(A ) furt he r obs erve d t hat the su m of R s.1. 95 cr ore w as invested b y t hese s hare appl icants i n AY 2011 -12 and not in AY 2012-13 i n question a nd ther ef ore, Section 68 could not have been invoked in relati on to amount i n ques tion in s o fa r as A Y 20 12-13 is co ncerned. It w as obs erve d b y t he C IT (A ) t ha t the act ual amount i nvested b y the se thre e sha re app li c ant s in AY 2012-13 was Rs. 64. 75 crores eac h, i.e. a t ota l of Rs. 1, 94, 25, 000/ - w he re as su m of Rs.65 l akhs w ere inves te d as sh ar e applicat ion mone y in A Y 2011-12 by suc h inves tors. T he A ssessi ng O ffi cer has made inq uiries wi th re fe re nce to a mount re cei ved i n As sess ment Y ear 20 11-12, i. e. , Rs. 1. 95 c rore as a gain st Rs. 1. 9425 cr received in Assess ment Y ea r 2012-13. T he C IT( A) thus dis agree d with the acti on of t he A O and re ve rsed the a ddi tions mad e. The rel eva nt ope ra tive paragraphs of the or der of t he C IT (A) is reproduced here under f or re ad y re fe re nce. 6 . I h a v e g o n e t h ro u g h t h e a s s e s sm e n t o r d e r , g r o u n ds o f a p p e a l a n d t h e s u b m i s s i o n s o f t h e a s s e s s e e . T h e A O h a s a d d e d a n a m o u n t o f R s . 1 . 9 5 c r o r e u / s . 6 8 o f t h e A c t c o n s i d e r i n g t h e s h a r e a p p l i c a t i on m o n e y r e c e i v e d f r o m 3 p a r t i e s a s u n e x p l a i n e d c r e d i t s . I t h a s b e e n s t a t e d t h a t t h e a s s e s se e h a s f a i l e d t o p r o v e t h e g e n u i n e n e s s a n d c r e d i t w o r t h i n e s s o f t he s h a r e a p p l i c a n t s . T h e a d d i t i o n h a s b e e n m a d e m a i n l y r e l y i n g o n t h e m o d u s o p e r a n d i a s d e s c r i b e d in t h e c a s e o f M / s . B i s a k h a S a l e s d e c i d e d b y t h e H o n ' bl e I T A T , K o l k a t a B e n c h a n d o n t h e f a c t t h a t d e s p i t e t a k e o v e r o f R s . 9 7 . 5 % o f s h a r e h o l d i n g , t h e r e h a s b e e n n o c h a n g e i n m a n a g e m e n t a n d c o n t r o l o f t h e a s se s s e e c o m p a n y . T h e a s s e s s e e i n i t s s u b m i ss i o n s u b m i t t e d t h a t a l l t h e de t a i l s r e q u i r e d li k e t h e b a n k a c c o u n t o f s h a r e a p p l i c a n t s c o m p a n y . , a u d i t e d f i n a nc i a l s t a t e m e n t , I . T r e t u r n s , F o r m f o r a l l o t m e n t o f s h a r e s e t c . w e r e s u b m i t t e d t o t h e A O a s a l s o t h e c o n f i r m a t i o n f r o m t h e 3 s h a r e a p p l i c a n t s . I t w a s a ls o s u b m i t t e d t h a t a s n o t e d I.T.A. No.6320/Del/2016 6 b y t h e A O , t h e m a n a g e m e n t o f t h e c o m p a n y h a s i n d e e d c h a n g e d . T h e s h a r e h o l d e r s h a v e a p p o i n t e d t h e i r o w n d i r e c t o r s i n t h e co m p a n y w . e . f . 2 5 . 0 9 . 2 0 1 4 . T h e c h a n g e i n m a n a g e m e n t h a s a l s o b e e n r e g i s t e r e d un d e r t h e C o m p a n i e s A c t . F u r t h e r , a l l t h e 3 a p p l i c a n t s h a v e b e e n a s se s s e d u /s . 1 4 3 ( 3 ) f o r A . Y . 2 0 1 3 -1 4 a n d t w o o f t h e m f o r A . Y . 2 0 1 2 -1 3 . I t t h e r e f o r e a p p ea r s t h a t t h e a s s e s s e e h a s d i s c h a r g e d i t s o n u s r e g a r d in g t h e i d e n t i t y a n d g e n ui n e n e s s o f t h e t r a n sa c t i o n . B y t h e b a n k a c c o u n t s s u b m i t t e d , i t i s c l e a r t h a t t he s h a r e a p p li c a n t s h a v e e n o u g h f u n d s f o r i n v e s t m e n t w h i c h w e r e l i q u i d a t e d fr o m a n o t h e r c o m p a n y . T h e c r e d i t w o r t h i n e s s i s a l s o t h e r e f o r e e x p l a i n e d . T h e As s e s s i n g O f f i c e r h a s o n t h e o r e t i c a l b a s i s t r i e d t o p ro v e t h a t t h e a m o u n t i s u n e x p l a i n e d c r e d i t r a t h e r t h a n d i s p u t i n g a n d d i s p r o v i n g t h e f a c t s a s s u b m i t t ed b y t h e a s s e s s e e . 7 . I t w a s p o i n t e d o u t b y t h e a s s e s s e e a n d i s a l s o se e n f r o m t h e b a l a n c e s h e e t t h a t t h e a m o u n t o f R s . 1 .9 5 c r o r e w a s i n v e s t e d b y th e sh a r e a p p l i c a n t s i n A . Y . 2 0 1 1 - 1 2 a n d n o t i n A . Y . 2 0 1 2 - 1 3 . T h i s a m o u n t o f R s . 1 . 9 5 c r o r e i . e . R s . 6 5 l a c s r e c e i v e d f r o m e a c h o f t h e 3 s h a r e a p p l i c a n t s w a s c on v e r t e d i n t o s h a r e h o l d i n g b y a l l o t t i n g t h e s h a r e s t o t h e m i n A . Y . 2 0 1 2 - 1 3 . T he a m o u n t c a n t h e r e f o r e n o t b e c a s h c r e d i t f o r A . Y . 2 0 1 2 - 1 3 , T h e a c t u a l a m o u n t i n v e s t e d i n A . Y . 2 0 1 2 -1 3 b y t h e 3 s h a r e a p p l i c a n t s w a s R s . 6 4 . 7 5 l a c s e a c h i. e . a t o t a l o f R s . 1 , 9 4 , 2 5 , 0 0 0 / - . A g a i n s t t h e s e a m o u n t s a l s o , t h e s h a re s h a v e b e e n a l l o t t e d i n A . Y . 2 0 1 3 -1 4 . T h u s , t h e 3 s h a r e a p p l i c a n t s h a v e i n ve s t e d i n 2 y e a r s c o n t i n u o u s l y a n d t h e y h a v e b e e n a s s e s s e d u / s . 1 4 3 ( 3) w h e r e t h e t r a n s a c t i o n s w e r e a c c e p t e d . S i m i l a r t r a n s a c t i o n o f R s . 1 . 9 5 c r o re h a s b e e n a c c e p t e d b y t h e d e p a r t m e n t i n A . Y . 2 0 1 1 - 1 2 w i t h o u t r a i s i n g a n y d o u bt a n d s u sp i c i o n o n t h e s h a r e a p p l i c a n t s w h i c h a r e t h e sa m e a s i n c u r r e n t ye a r . I a m t h e r e f o r e i n c l i n e d t o d e c i d e i n f a v o u r o f t h e a s s e s s e e a s t h e a s s e s s e e h a s d i s c h a r g e d i t s o n u s b y p ro v i d i n g t h e r e q u i r e d d e t a i l s w h i c h h a v e no t b e e n d i s p ro v e d b y t h e A O . T h e a d d i t i o n u / s . 6 8 m a y t h e r e f o r e b e d e l e t e d . 8 . T h e g r o u n d r e l a t e d t h e c o m m i s s i o n o f R s . 3 , 9 0 , 0 0 0/ - @ 2 % o n a m o u n t o f s h a r e c a p i t a l b e c o m e s i n f r u c t u o u s i n v i e w o f t h e a bo v e d i s c u s si o n a n d t h e a d d i t i o n m a y t h e r e f o r e b e d e l e t e d . 9 . I n t h e r e s u l t , t h e a p p e a l o f t h e a s s e s s e e i s A l lo w e d . 5. A gg rieve d by t he r eli ef granted b y t he C IT (A ), the R evenue is in a ppeal be fore the T ri bunal. 6. T he ld. DR fo r the Reven ue s trongly assai led t he f in di ngs of the C IT (A ) and submi tte d tha t t he C IT (A ) has adopted e as y course of rej ec ting t he observa ti on s made by the A ssessi ng O ffice r whic h w ere fou nded upon i nquir ies co nduc ted a nd the s ur roun di ng ci rc ums ta nces poi nt ing out tha t suc h subsc ri pt ion in que st io n is typi cal of acc omm oda tion e ntr ies r ec eived from p aper compa ni es. The l d. D R refe rred to a nd relied upon the obser vati ons mad e in the assess me nt o rde r, large numb er of j udgments quote d b y the I.T.A. No.6320/Del/2016 7 A ssessi ng O fficer be fi tt i ng t he ci rc ums tances and existing in the prese nt case and pointe d out t hat t he C IT (A ) has defused the obs erva tio ns i n a ver y gene ri c t er ms a nd in a pet ty fogging ma nner. It w as a ll eged that C IT (A ) has no t appl ie d it s mind to a ll the c ons i de rati ons exist ing in the present c ase. For i nstance, the subs cri be rs who inves ted such la rge amount did not c ome f orw ard be fore the A O along w it h their books as called for. T he no tice under Sec tion 133(6) was als o re tu rned unser ved for w hich no reas o ns ha ve been provided. T he A O is en ti tled t o make suc h inqui ry as d ee me d fi t in a given case. A tte nd anc e of the w itness is cr uc ial in s uch ca ses mor e parti cu la rl y i n t he present case where the transac tions recorded in the b ooks of the asse ssee compan y s ma cks of pa pe r trans act ion. Th e CIT (A ) has mer el y place d re li anc e upon docu mentar y ev idenc e s and co mpletel y i gnored the surr ounding c i rcums tan ces w hi ch are screa mi ng hoa rse on the cla ndestine n at ure of such accomm oda t ion. T he C IT (A) has not answe red as to w hy a n u nknown c ompan y s ituate d in Kol kata w i ll ma ke a n i nve st me nt in a D elh i base d compa ny when i t har dl y has an y amount l yi ng in its bank acc oun t and is not engag ed i n an y inco me gene rating acti vit y at all. T he subs cri be rs cla imed to have liqu idat ed cer ta in exi st in g adva nces and trans fer red t he a mount t o the asse ssee co mp any based on a lopsided bal ance-sheet s uch re- charac te rizati on o f a dvanc es are al so t yp ic al o f accom modati on entr ies. N o i nc ome is sh ow n t o have bee n gene ra ted b y the subs cri be r co mpanies ei the r in t he past or during the year. 6. 1 T he ld. D R nex t pointed ou t t hat it w oul d b e interes t i ng t o know as to w hy a promoter w ill hand ov er 97. 5% of sha re holding to a n u nknown s ubscri be r wit hou t pre mi um, unl ess of c ourse w her e suc h subs cription is a me re book e nt r y w it hout an y I.T.A. No.6320/Del/2016 8 inte nt ion of actua l tra ns fe r. The asse ssee -comp any i s engaged i n a esta bl is he d bus iness and ge nerati ng good amount of re venue (Rs. 31. 37 c ror e - FY 2012- 13; R s. 23.5 6 crore - F. Y . 2012- 13) a nd generat es taxable i ncome a nd has fi le d a return o f Rs. 32. 16 la khs dur in g the yea r. It i s for t his reas on that s ubs cribe rs are non existe nt and the comma nd & cont rol continues w ith the exis t ing sha re holders and such ar ra nge me nt has be en c oncei ved. It is pe rplexing that s ha reholder holdings of 9 7. 5%, i. e., the real hol de r w ill not choose t o come forw ard to defend t he ir c ase o f bona fide ow ne rs hi p. I t is a cla ssi c case of conve rs ion of unacc oun te d mone y throug h t he cloa k o f sha re c apita l as ci rcu mstances points out. The C IT (A ) has no t looked into a ny of s uc h overw he l mi ng aspects a nd app li e d wrong tests to r everse t he ac tion of t he AO . The C IT (A ) hi ms elf h as not made an y inquir y nor aske d the A ssessi ng O fficer to make suc h inquiries w hich remaine d unc omple ted in t he cou rse o f t he assess men t. 6. 2 T he l d. D R referre d to the judgme nt re ndered b y the H on’ ble Supre me Court i n the ca se of P r.C IT vs. N RA Iro n & Steel (P ) Ltd., (20 19) 103 t axm ann. com 48 (SC) w he re the i nves tmen t fro m K olkata bas ed c ompan ies having s i mi lar trai ts as pre sent i n the impug ned ap peal w ere su bj ected to judic ial sc rut i ny a nd the H on’b le S upreme Cour t ma de fa r-r each in g obse rvati ons includi ng that the assess ee is requi re d to pr ove b y coge nt a nd c re dible evidence that t he subs cri pt ion mad e w as genui ne. If th e inquiri es and i nv est igat i ons re vealed tha t identit y o f credi tors / subs cri be rs are du bious or doubt ful for lack of cr ed itw ort hi ness the n one canno t sa y t hat ge nuinene ss o f the transa ct ion is est ab li she d. 6. 3 T he l d. D R also refer re d to the jud gment del ivered by th e I.T.A. No.6320/Del/2016 9 H on’b le D elhi H i gh Court in the cas e of C IT vs. Nova P rom oters and F inle ase (P ) Ltd. , (2 012) 34 2 IT R 169 (D el) and N R P ort foli o (s upr a) and su bmit te d t hat the p ri ncip les l ai d d ow n in s uch judgments a nd other host o f j udgme nt ref erred in the assess ment order would s qua rely appl y to the prese nt cas e. T he l d. D R thus submit ted t hat the C IT (A) has ignore d t he s ur roun ding ci rc ums ta nces, huma n con duct and pr eponde ra nce o f probabi liti es ove rw helmi ng in suc h t yp e of s ubscription. The ld. D R next submit ted t ha t C IT (A ) has s u mmaril y brus hed a side the case made out b y the A ssess ing O ff ic er bas ed on a nomi na l di ffer ence i n the amount o f s ha re subs cri pt io n recei ved dur ing the year qua the amount received i n the pr ev ious yea r a nd he ld t hat t he inq uir ies ma de pe rt ain t o A Y 2011-1 2. I t is nobodies ’ case that the amount has bee n rece ived fr om the same s ubs cri be rs in A Y 2011- 12 as w ell as AY 2012-1 3 in quest ion. Simi la r a moun t has been recei ve d indeed i n this year vis -à- vis ea rl ie r yea r. T herefore, it w as incu mbent up on the assessee t o exp la in the credit re ce i ved du ring the year if no t more. T he mo ne y c re di te d is fungi ble a nd one can not sa y t ha t the enqu ir y t raversed be yond t he pre vious year re le vant t o AY 2012 -13 i n ques ti on as long as the mone y ca me t o the credit of the as sessee d uri ng t he ye ar fr om sa me se t of pa rties albei t w i th s ome m ar gi nal di ffe rences . The CI T(A ) hold ing the co- termi nus powe r of t he A O could not have si mpl y r ej ected the assess me nt w ith out i ndulging h imsel f in mak ing s uitab le i nq uiries or ca us ing such inqui ries through A ssessing O ffic er w hen such subs tanti ve al legati ons have bee n made. T he ld. D R thus submit ted that t he ord er of t he C IT (A) is founded of i rre lev ant consi derati ons and has b een passed w ithout appre ci ation of ground real ities. The ld. DR thus so ught reve rsa l o f t he orde r of the I.T.A. No.6320/Del/2016 10 CIT (A ) a nd res tora tion of t he o rde r of the A ssessi ng O ffi cer. 7. T he ld. counse l fo r the ass essee, on the ot he r hand, relied upon the order of the C IT (A ) and submit ted that t he vie w take n by the C IT (A ) is in s ym me tr y wi t h t he fac tual matrix and doc ument ar y evidences fi le d a nd t hus no fa ul t can be fou nd ther ew ith. Th e ld. counse l submi tt ed that t he pa yments have bee n recei ved tow ar ds subs cr iption i n bot h the A Y s 2011-1 2 and 2012- 13 through ba nki ng cha nnel. The su bscribers are duly assessed under Se ct ion 143(3) of the Ac t b y the Income Ta x Depart ment eit he r in t he AY 2012-13 o r in A Y 2013- 14. T he t ra nsac tio n of subs cri pt io n w as t hus oste ns ibl y e xamined and acce pted b y the A O of subs c ri ber cos. . T he l d. counsel a lso pointed o ut tha t the assessee has recei ved Rs. 65 lakhs i n A Y 2011-12 for w hic h t he prese nt inquir y a ppea rs to have been ma de. T he a ssessee has act ua ll y rece ived Rs.64, 75, 00 0/- fro m same s ubsc ri be rs i n AY 2012-13 w hich is not subj ect ma tte r of i nquir y b y the Assessing O fficer. The ld. c ouns el thus s ubmi t ted t hat the Assess ing O f fice r has travel le d be yond t he s co pe of Section 68 o f t he A ct and indul ged in inqui ries i n rel ation t o the transac ti ons exec ut ed in A Y 201 1-12 w hic h is not per miss ible in s uc h proceedin gs. T he ld. counse l ne xt poin ted out tha t overemphas is ha s bee n placed for non-service of notice under Sect ion 1 33(6) of t he Act to the subs cri be rs w he re as the AO himself has a dmi tted th at comp li ance to the re qui re me nt of not ice unde r Sectio n 1 33(6) has b een carr ie d out by the s ubs c ribe rs. T he ld. c ouns el als o poi nted out t hat nothi ng t urns on t he fa ct that the ma nagemen t of t he c ompany has not been shifted t o the new subs cribers des pite thei r ho ldi ngs of 97. 5%. Such dela y in t ra ns fe r of man age me nt do occur in bus in ess w orld a nd the man age me nt has bee n eventuall y t ra ns fe rre d i n the I.T.A. No.6320/Del/2016 11 lat er yea rs. As poi nte d out be fore the CI T(A ), t he ld. couns el als o submit ted that the dec is ions re ndere d i n the cas e of N RA Stee ls, Bisakha Sa les, Nova Promote rs, NR Port fol i o e tc. hav e bee n deli ve re d i n the i r pec ul ia r fac ts w hereas pres ent case i s premis ed on di ff erent fact s. Thus, t he rat i o of the j udgme nt has no appl icati on in t he pr ese nt case. The l d. counsel s ubmit t ed t hat the CIT (A ) has ta ke n a ra tional view cons istent wi th vari ous decisi ons re ndered by dif fe rent c our ts a nd r ightl y hel d t ha t o nus pl ace d upon the ass essee w as dul y di scharged. 7. 1 It w as furt he r poi nted out that i t is not the obligati on of the assessee to discharge t he onus to the hi lt. The assessee i s expected to offer e xpla nat ion w hic h is pl aus ible. The ass essee h as success full y est abl ished t he pla usi bi l it y of such su bscr ip ti on. 7. 2 T he ld. counse l t hus su bmi t te d t ha t no in te rference w ith the order o f the CI T(A ) is called f or. 8. We have dis pas sionate ly considered t he ri val s ubmi ssions and per used the fi rst appe llat e ord er and the assess men t order. We have al so perus ed the mat er ia l and e vi dences re fe rred t o and re l ied upon i n t he c ourse of the hear in g b y the resp ect ive s ides an d h ave als o pe rus ed t he ca se laws re fe rred to and c it ed. 8. 1 T he na tu re and s ou rce of s ubscript ion o f s ha re capit al of thre e subsc ri be r-compa ni es an d con sequen tl y c reditwort hine ss of suc h subsc riber cos. as w ell as genu in ene ss of res pec t ive trans ac tions is in cont ro ve rs y o n the counte rs o f s. 68 of t he A ct. Whil e i t is t he c ase of the reven ue t hat o nus cas t upon t he asse ssee to p rove th e credit w orthiness of the s ubs cri be r and genu inenes s of the t ra nsac t io n i s not p roved in t he f acts of t he case, t he assess ee, I.T.A. No.6320/Del/2016 12 on th e other ha nd, con te nds that such onus pl ace d up on th e assessee unde r Secti on 68 o f t he A ct has been dul y dis cha rged as ri ght l y hel d b y t he CIT (A ). T he is sue is ess en tially fac tual i n natu re and thus w holl y depends on the exa mi na tio n of facts thre adbare. 8. 2 T o re ca pi tulate, the A O in the cours e of assessme nt obs erve d that th e ass essee has rec eiv ed share app licati on mone y/subscripti on a mo unt ing t o R s. 65 Lakh eac h f rom three subs cri be r c omp anie s na mel y (i ) Captetow n Me rc handise Pvt. Ltd. (i i) New L ook Vinmay P vt. L td. and (ii i ) V ishal E nclave Pv t. Ltd. aggregat ing to R s. 1, 95,0 0, 000/-. The A sses sing O ffic e r made certa in ke y obse rvati ons such as the shareho ldi ng of pr omote rs of the A ssessee c o. na me l y Da l mi a Fa mil y was reduced from 100% to 2. 5% and despite such ne a r complet e sale of t he assessee - co mpan y. D esp it e purpo rted t ra ns fe r of ownership, the re was no chang e in the ma nagement and old promo ters conti nue to manage the ass essee co. T he s hares w e re purp ort ed ly all otte d to t he new subs cri be rs w ithout an y premiu m. Noti ce issued under Se ct ion 133(6) of t he A ct f or i nqui r y t ow ar ds t he nature and source of mone y rece ive d f rom su bscribers se nt on tw o occa si ons retu rned back u n-se rved. D espi te no n s er vice o f noti ce, the thre e subs cr ibes have suo m otu filed l et ters c onf ir mi ng the t ra nsa cti on. The assessee-compan y fai le d to produc e t he subsc ribers al ong wit h thei r bo oks of accou nt as ca lled for by the AO . The A O furt he r obs erve d t hat the balance-sheet and the e xtract of ba nk account of the sharehol de rs w ou ld show that su ch transactions carried out b y the s ubsc ri be r companies ar e t ypica l of pa pe r co mpani es and thei r act iv it ies a re t yp ical of p roviding accom mod at ion entries. T he audi tors of t hree inves tor-compa nies based i n K ol kata are c ommon I.T.A. No.6320/Del/2016 13 and si t ua ted in D e lhi. T he AO ca lled the i denti t y, the genuin eness and creditw or thi ness i n qu est i on havi ng re gard to attende d ci rc ums ta nces and preponde ra nce a nd probabi l ities in t he ligh t of the j ud ic ial pronounce ments. The explanat ion offered were not fou nd sati sfact ory b y the AO on t he t ouc hs tone of s. 68 of the A ct and conseq uentl y the mone y rece ive d fro m s ubsc ribe rs w ere trea ted as unexpl aine d cash c re di ts in the hands of A ssessee. In fi rs t a ppeal T he CIT (A ) re ve rse d the act ion of the Assessing O fficer b y a br ie f findin g as qu oted i n para gra ph no. 2 supra. 8. 3 In t he bac kdr op of del ine at ions rec orded i n p receding pa ra graphs, w e observe t hat ce rtain pertinent poi nts ha s not b een addressed by t he CIT (A ) w hil e gran ti ng re lie f to t he a ssessee viz. (i ) th e t ransact io n o f s hare s ubsc ripti on bea rs unnatural a nd unusu al fea tures such as t he fi nanc ial s ta tement of subs cri be rs show N i l or ne gl igible income ; a K ol ka ta bas ed n on active c o. ma ki ng la rge inv es t ments b y c orr espo nding reduc tion of so ca lle d non c urrent inv est me nts ; no income bei ng derived despi te la rg e capit al and res e rves and so on. In this ba ck drop, the A O w as indeed ent itle d to ent e rtai n legit i mate suspic io n on t he prop riet y of t ra nsacti ons. Such s us pi cion be ing mothe r of en qui ry, t he AO ri ght l y iss ue d noti ce unde r 133(6) a nd als o as ked th e A ssessee t o pro duc e the s ubscribers t o el icit t he c i rc umst ances of maki ng inves tment and source of suc h in vest ment. Th e subscri be r co mpanies w ere no t found t race ab le on the address made ava ilable and thus the concl usi on drawn is sol ely upon t he pape r evi dences fi led in t he for m of bank s tat ement, fina nc ia l s ta tement etc. The subs cri be rs eva ded thei r presence be fore t he A O to clari fy the facts ava ilable to the i r persona l kno wledge. ( ii ) The invest ment w ere acc epted as bo nafide b y t he C IT (A ) w ith out an y inquir y on I.T.A. No.6320/Del/2016 14 the ci rc umstances whic h le ad to s uch lar ge i nvest ment in an unknow n compa ny. (iii ) The C IT (A ) ove rlooked the vital fa ct t hat the c oncerned investors we re not presente d be fo re the Assessing O fficer t o el ic it i nformati on on t he reaso ns for s uc h in vest ments des pi te negli gi ble income of their ow n and a near lack of cas h fl ow . ( iv ) the fi nanci al cred ibili t y of su bscribers w ere found t o be under se ri ous doubt. (v ) w h y t he exist ing p romote rs have pur portedl y gi ven cont rol and command of a ru nni ng c ompa ny t o unknow n s ubs cri bers w i th out an y pre mi um in di rect odds wit h ord inar y prude nce and ra tional e w here asse ssee co. e nj oys large turno ver and profits. Suc h subsc riptio n thus w oul d t ri gge r suspicion on the b ona fides of t ra nsacti ons and indicat e ele me nt of surr ogate ow ners hi p. T he prope r cou rse w as to make enqui ry wi th the su bscr ib ers for logica l c oncl us ion w hich the A O i nde ed tr ied w ithout s ucce ss. (vi) T he A O has unde rt aken a nal ysis of the fi na ncia l st at e ments of t he s ubs cri ber and de mo nst ra ted that the trans ac tions a re t ypi ca l of a pa pe r compa ny in the li ght of the fi na ncia l da ta; for i ns tance, t he s ubs cr iber comp any namel y Capet ow n Merchand ise P. L td. h as a mea ge r capi tal of R s. 2 4. 19 lakhs but h ow ev er treas ur e la rge reserve of R s.11. 71 crore and suc h res erves are kept inves ted i n unp rodu ct ive non-c urr ent assets. Despit e su ch la rge rese rves, t he subsc riber has no t ea rned even a rupee. C o upled w i th th is, t he audi tor of t he assess ee - co mpan y is an audito r of suc h Kolka ta ba sed com pan y as a co mmo n thre ad. ( vi i) T he ba nk s tate me nt te nds to reflect that certa in e xis t ing advances have be en l iqui da te d a nd depl oye d i n the assessee-compan y. (viii ) T he AO h as raise d pe rt inent q ues ti on as to w h y the unknow n pro mote r wi l l bri ng s uc h large mone y a nd ther ea fter ac t eva si vel y i n the replies and e xpla nati ons. I.T.A. No.6320/Del/2016 15 8. 4 T he dispute sur fa ced in t he prese nt case is at tr ibutable t o dete rminat i on o f i ncome ta x liabil iti es of the assessee rather t ha n fi xing a n y c ri mi na l lia bilit y or acco untabili t y of t he assessee f or an y o th er l aw o r obligati on. I t i s t rite that t he admis sibili t y of doc uments, evidences on ma terial differs great l y in income ta x proceed ings and c ri mi nal proceedi ngs respectivel y. T he i nc ome tax l iabi lit y is as certa ined on the basis of ma te rial avail ab le on reco rd co upled w ith the surroundi ng ci rcu mst an ces, huma n conduct a nd preponde ra nce of probabi li ties. T he A O is not fe tt ered or b ound b y technica l rules about evi dence c ontaine d i n the Indian E vide nce A ct an d he is entit led t o act on mat er ia l whic h ma y not be acce pt ed as e vi dence i n a court o f law . Th e Assessi ng O fficer i n t he p resent cas e h as de mo nstrate d that a c ompan y s et up in a f ar o ff pl ace unknow n to the asses see-co mpan y has trans fe rre d large a mou nt b y w a y of s hare w hich effec t ivel y trans fe rs complete con trol of t he ass essee-co mpa ny in t he hands of suc h un know n c ompan y and su ch unkn ow n subscriber compa ny have ni l or negli gi bl e income and ha ve no fi xed assets. T he reser ves are co rre spondingl y repres ent ed by s i mi lar non current assets nature o f w hich is aga i n unk now n. Such a ct is cont rar y to co mmo n cou rse o f human c ondu ct and a ppea rs out of sync w it h gro und re alit ies. The trans ac ti on s bei ng uncha ra cterist ic of bus iness w orl d, a grea te r deg ree of onus lies up on the assessee to esta bl is h the bona fi des of t he t ra nsact ion. The e xplanat i on offer ed b y the ass essee t hat mone y w as re ceive d t hro ugh ban ki ng chann el and a lso assessed i n the hands of the s ubs cr ib er appea rs ve ry shall ow and i ncompre hensible. T he subs ti tu tion of one part y by another in t he hands of s ubs cri be r co. does not have a ny inco me tax i mp li c ati ons. The H on ’bl e Supre me C ourt in the case I.T.A. No.6320/Del/2016 16 of NR A I ron & Steel (supra ) has in ter a lia obs erve d tha t mere trans ac tion rec ord ed t hrough banki ng channel is not a lwa ys suff ic ient to disch ar ge t he burden of pr oof. The AO in the ins tant case has a tte mpted t o inves tigate t he ci rc ums ta nces for ma king inves tment in t he assess ee-compa ny an d c re di tw or th in ess of the subs cri be rs etc. The A O was s t onewal le d f rom maki ng s uc h enquir y in a lo gical manne r. Ce rtain ev idences w ere pla ced b y w ay of ban k sta tement, fi nancial s ta te me nt of the sub scr ib er etc w ithout know ing as to how t he subs cri be rs ha ve come i nt o poss ess io n of suc h mo ne y and what act uated them to pla ce such larg e inves tmen t i n a D el hi base d assessee-compan y. B esi des, i t is als o not know n as to w hy t he pr omo te rs of t he as sesse e-compan y w ill part w it h thei r bus iness ie 97. 5% holdi ng to the subs cri be r w ithout any pre mi um w hen t he bus i ness mo del of the assessee co mpan y appear rob ust and yiel ds ar e cons is tent and qui te att ract i ve year a fter yea r. It is tr ite that the pri nc iple ‘w hat apparen t is rea l’ is not necess aril y sac rosa nct an d ma y b e ove rlooked if s urr ound ing c ircums tances so s ugges t by a ppl yi ng the t est h uman probabil it y. The A O has a ppl ied tw in tes t of surr ounding c ir cu ms tan ces and tes t of proba bil it y. T he CIT (A ) on the othe r hand ha s merel y acce pted the ve rs ion of the assess ee tow ard s sha res s u bscrip ti on w i tho ut any de mur and without a ny inqui ry eit her hi msel f or throu gh the A O. It is the fact on re cor d that t he s ha re s ubsc ri be rs ha ve not a ttende d the procee dings be fore the A O and the re fore, the f ac tual ana l ysis ren der ed b y the A O cannot be s aid t o be unw or thy of an y re li ance. The CIT (A) t o our mi nd, mer ril y accepte d mu nda ne and s te re o-t yp ed defenses ra ise d o n be ha lf of t he assesse e i n a pe rfu nctor y mann er wi thout seeking an y comm ent fro m the A O and w it hout t raversing gl a ri ng I.T.A. No.6320/Del/2016 17 facts. It w as expec ted of the qua si j udicia l au thori t y of CIT (A) to inqui re on suc h facts. T he CIT (A ) has accepte d the sh are subs cri pt io n broadl y on t he bas is of t he assess men t carr ie d out under Se ct ion 143 (3) i n t he res pe ct of sha re s ubs cri be r compa ni es. We ha rd ly see any s ubs ta nce i n s uch co urs e of acti on. When a speci fi c inq ui r y i s put up, t he c orre spondi ng pa rt y is re qui red t o explain s uch q uer y t o t he s at is facti on of the AO unle ss t he iss ue can be de te rmined w ithout such a c ourse. A n assess ment ca rried out unde r Sect io n 143(3) in the ha nds of a le nde r/subsc ri be r is not a pana cea to d isc harge suc h heavie r onus. 8. 5 T he C IT (A ) has further o bserved tha t the assessee was havi ng en ough funds fo r inve st ment on l iq ui dati on from a not he r co mpan y. Suc h re cycli ng of mone y is integral pa rt of t he m odus ope rand i in suc h c ases as o bserved i n la rge n umber of cases. The cred itw orthiness of the ass essee cannot fi nd refuge to suc h i nter - trans fe r fr om one pa rt y to an ot her. S uch act is a smoke scr ee n as doubte d b y the revenue. The C IT (A ) ought to h av e app li ed his mi nd t o al l t he perti nent a ngle a nd ought t o co me to a ra tional concl us ion. 8. 6 T he C IT (A ) furt he r dis ca rde d the acti on of the A O on th e gro und t hat a mo unt s ubj ected to enquir y b y the A O stands at Rs. 1. 95 crore as agai ns t the correc t amount of 1. 9425 lakhs rec d. fro m these p art ies during t he yea r. The CIT (A ) t hus drew infe re nce that the A O has w ron gl y i nqui re d i nt o t he c re dits re la ting t o ot her a ssess men t years w hich is no t pe rmis sible in l aw under Secti on 68 of the A ct. We d o not unde rst and the ratio nale of suc h obs ervat io ns. It is an admit ted pos i tion that as sessee h as recei ved s ubscript i on of Rs. 64. 75 l ak h from each par ty du ring the I.T.A. No.6320/Del/2016 18 ye ar as agains t Rs. 65 lakh al leged by the A ssess i ng Of fice r. H ow eve r, it is not a case t hat no s ubs criptio ns f rom the i mpugne d pa rt ies have been recei ved duri ng the ye ar. T he sc ope of inqu ir y at bes t could be res t rict ed R s. 64.7 5 la kh each subsc ribe r rather tha n Rs. 65 l ak h eac h s ubs cri ber. The C IT (A ) holdi ng t he co -t er mi nus pow e r of t he A ss essing O ffic er w a s under du t y t o c orrect suc h mi stake as lo ng as the a mount w as re cei ve d from s uch s ubs cri be rs dur in g the year. T he judgment re ndere d b y the H on ’ble D elh i H i gh Cour t in the cas e of C IT v s. J a n sa m p a rk A d v e r t i si n g an d M ar ke t i n g P vt . Lt d . ( 2 0 1 5) 5 6 t a x m a n n. c o m 2 8 6 ( D el . ) s er ve s as a us e fu l gu i d e . Th e H on ’b l e D e l hi H i gh C ou rt i n t ha t ca se o bse rv e d t ha t w he r e t he A O fa i l e d t o di sc h a rg e i t s o bl i ga t i o n to c o nd uc t a p r op e r i nq ui r y t o t ak e t he m a t t e r t o l o gi ca l c on c lu si o n, it i s a l so th e o b li ga t i o n o f t h e fi r st a pp e l l a t e a u t h o ri t y a n d i nd e e d t h a t o f I TA T to h a v e e n su re d t ha t e ffe c t i v e i nq u i r y is c ar ri e d o ut o n t h e su b j e ct ma t t e r o f ap pe al . The C IT (A ) has fail ed to a dh ere t he leg iti ma te expectat i ons a nd passed a nondes cript a nd c ryptic order w it hout dealing w ith fun damenta l aspect s permeating the is sue i nvolved. 9. It is tr it e that th e scope of powe rs ves ted t o CIT (A ) unde r Sect ion 251 are c o-te rminus an d co-e xt ens ive w it h that of AO exercis ing quasi judicial fu ncti ons. T he C IT (A ) is not onl y an appel late aut ho rity b ut als o posses ses the unique pow er of a n adju dicati ng authori ty s i mi la r to that of A O. The powe rs of inqui ry thus, in e s sence, runs concu rre nt ly f or proper a ppreciat ion of a ll ma te rial pl aced b efore him. T he CIT (A ) ou ght t o have made sui ta bl e inqui ries on the pr opr ie ty of s hare s ub sc ri pt i on decla red in the li gh t o f t he doc ument ar y evi de nces and th e at tendant ci rc ums ta nces i ns tea d of brush ing asi de the a ct ion of the A ssessi ng O ffi cer in loop s ided mann er. I.T.A. No.6320/Del/2016 19 10. In o ur considered view , the orde r of t he A O lack co mprehe ns ion. The C IT (A ) is e xpe cte d to e xp ound t he fac ts i n pe rspect i ve w hi le dis pl ac ing the ord er of t he Assessin g Office r. The fal lac y in t he act io n o f t he C IT (A ) is quite vis ib le and hence the i mpugne d fi rs t appella te orde r can not be countena nced in l aw. 11. T he ap pell ate order o f the C IT (A ) is thus se t asi de and the ma tter is res tore d ba ck to the file of the C IT (A ) for fres h dete rminat i on of the is sue in acc ord ance w i th law after ma ki ng inqui ri es or ca us i ng in qui ri es through A ssess in g O ff icer in this re ga rd. T he assess ee sha ll howe ve r be given s ui table op portunit y to adduce evi dence and of fe r expla nati on as ma y be consi de re d exped ie nt to de fe nd its cla im on b ona fides of t he subs cri pt ion recd. duri ng the year. 12. O ur obs er vat ions noted a bove s hall not cons titute an y expressio n of opinion on merits of the case. It s hal l b e ope n to the assessee t o es ta bl ish the bo na f ides o f t he su bscr ip tion to the sat isfacti on be fo re th e C ITA ). W it h the se obse rva tio ns , the orde r of t he CIT (A ) i s s et as ide a nd t he matte r is rest ore d back to the fi le of C IT (A) for f res h dete rminat i on in ac co rdance w i th l aw. 13. In the resu lt, the app eal of t he R eve nue is allow ed f or sta tis ti ca l purpos es . Order pronounced in the open Court on 14/12/2023 Sd/- Sd/- [YOGESH KUMAR US] [PRADIP KUMAR KEDIA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: /12/2023 Prabhat